Dominion ordered to refund $78.3 million to customers

State regulators have ordered Dominion Virginia Power to give back $78.3 million to its customers because the utility made more than its authorized profit in 2009 and 2010.

A residential customer who uses 1,000 kilowatt hours per month will see a credit of about $2.85 per month over six months, starting no later than the February billing cycle, according to the State Corporation Commission's order released Wednesday. The refund amounts to 60 percent of Dominion's overearnings - all the company is required by law to repay.

This is the second time in three years that Dominion has been forced to refund its customers for making too much profit. Commission staff concluded that the company earned about $500 million more than it should have in 2008 - a finding that contributed to Dominion's agreement to forgo a rate increase it proposed in 2009 and give refunds.

Paul D. Koonce, Dominion's president and CEO, said in an emailed statement that the company is looking more closely at the details of the commission's decision but appreciates its work.

Customers will receive a credit based on their power usage in 2009 and 2010.

The commission's ruling came from its first biennial review of Dominion's base rates since a 2007 state law established a new regulatory structure for power companies.

The law allows the commission to increase the company's rates if the review shows that it has earned too little. If it finds that the company has earned more than authorized, it can order a refund to customers, but only of 60 percent of those excess earnings.

Under the settlement of Dominion's 2009 rate case, the commission cannot change the company's base rates until the end of 2013.

However, it can use this review to decide whether Dominion's current authorized rate of return is appropriate. The rate reflects the company's profit on its investment in power plants, power lines and other parts of its system. The commission also can adjust the authorized rate of return for the next two years.

Dominion's authorized rate of return for 2009 and 2010 was 11.9 percent, and the company could earn half a percentage point above or below that to remain within the approved range. The commission concluded that Dominion earned an average rate of return of 13.3 percent over the two years.

In documents filed for the current biennial review, the company asked that the commission raise its authorized rate of return to 12.5 percent going forward.

Instead, the commission ruled that a 10.9 percent rate of return is "fair and reasonable" for 2011 and 2012.

In the next biennial review in 2013, if the commission concludes that the company has earned too much again, it can order a reduction in base rates under state law.

Base rates cover the company's costs to generate and distribute electricity to homes and businesses - plus a profit on its investment in that system - but do not include its costs to buy fuel to run power plants.

That fuel rate can change annually, based on market prices for coal, oil, natural gas and uranium.

Carolyn Shapiro, (757) 446-2270, carolyn.shapiro@pilotonline.com